Ukraine war, higher rates and sluggish trade aggravate longstanding structural problems in EU powerhouse
email rounding up the latestGloom has replaced relief as the overriding sentiment about Germany among economists. Experts are warning of another downturn in Europe’s largest economy, despite it emerging from last winter’s energy crisis in better shape than initially feared.
German gas and electricity prices have retreated since last year. But they remain higher than in many non-European countries and production in Germany’s energy-intensive Adding to the country’s worries, its traditional strength in carmaking is under threat, as its big brands are losing market share to cheaper Chinese rivals in the fast-growing electric vehicle sector. “The country’s major export goods — cars — are increasingly contested,” said Martin Wolburg, senior economist at Generali Investments Europe.
“If you take the coronavirus crisis out, the underperformance started in 2017, so the structural issues have been there for a while now,” said Jörg Krämer, chief economist at German lender Commerzbank. The ZEW Institute recently branded Germany “a high-tax country for investment”, pointing out its effective tax rate on company profits of 28.8 per cent was well above the EU average of 18.8 per cent last year. When Scholz was asked this in a TV interview on ZDF earlier this month, the chancellor said the government was setting “an incredible pace” with lots of “concretely imminent” projects to accelerate the switch to renewable energy and boost labour supply.
“The government is already addressing some key issues,” said Holger Schmieding, chief economist at German bank Berenberg, citing planned laws to streamline planning approval for priority investments and to attract more skilled workers from overseas.
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